ONTARIO UBBABX TWELFTH ANNUAL REPORT OF THE ONTARIO ENERGY BOARD YEAR ENDING DECEMBER 31, 1971 c-i. -» * TWELFTH ANNUAL REPORT OF THE ONTARIO ENERGY BOARD YEAR ENDING DECEMBER 31, 1971 ONTARIO TELEPHONE 365-2851 ONTARIO ENERGY BOARD 790 BAY STREET TORONTO 2 February 16, 1972 Honourable Leo Bernier, Minister of Mines and Northern Affairs, Parliament Buildings, Toronto, Ontario. Sir: We have the honour to present herewith the Annual Report of the Ontario Energy Board for the calendar year 1971* Respectfully submitted, y <3s, \ C^-'t^A^y A. B. JJackson Viae Chairman /: CjfaLa. I. C. MacNabb Vice Chairman Member Digitized by the Internet Archive in 2013 http://archive.org/details/annualreportonta1971onta - 1 - INTRODUCTION This report, submitted in accordance with section 9 of The Ontario Energy Board Act, summarizes the activities of the Ontario Energy Board for the calendar year ended December 31, 1971. The Board acts under the authority of The Ontario Energy Board Act, sections k, &, 9 and 10 of The Municipal Franchises Act, and certain sections of The Petroleum Resources Act, 1971, The Public Utilities Act and The Asses sment Ac t . COMPOSITION OF THE BOARD The Act provides for a minimum of three and a maximum of five Board members. During the year under review, the Board consisted of two full-time members and one part-time member. The principal members of the Board staff are the Secretary, the Energy Returns Officer and the Deputy Energy Returns Officer, the Board Engineer, and the Supervisor of the Energy Studies Section. - 2 - FUNCTIONS OF THE BOARD The major functions of the Board are as follows: a) Under The Ontario Energy Board Act Approving and fixing the rates and charges for the sale, transmission, distribution and storage of gas in the Province. Ensuring compliance by gas companies with the Uniform System of Accounts for Gas Utilities. Granting leave to construct transmission pipe lines, production lines, distribution lines and stations. Granting authority to expropriate land for pipe lines and stations. Recommending the designation of lands as gas storage areas and reporting on applications for permits to drill wells in such areas. Authorizing gas storage operations in designated gas storage areas. Requiring and regulating the joining of interests in gas or oil pools, and apportioning the benefits of operation therein. Hearing and reporting to the Lieutenant-Governor in Council on proposals of gas companies to sell their systems, amalgamate with other companies, or acquire shares of other gas companies. Examining and reporting on any matters pertaining to energy referred to the Board by the Lieutenant- Governor in Council. b) Under The Municipal Franchises Act Approving terms and conditions of municipal gas franchise agreements, renewing or extending expired gas franchises or denying renewals or extensions if not in the public interest. Granting certificates of public convenience and necessity for the supply and distribution of gas in municipalities. - 3 - Under The Petroleum Resources Act, 1971 Examining and reporting on certain matters referred to the Board by the Minister of Mines and Northern Affairs . GENERAL ADMINISTRATION The Energy Studies group on the Board's staff, in addition to assisting the Board provides information, analysis and advice in a broad field of energy matters affecting the Province of Ontario. It collects and maintains certain oil and gas statistics, develops informative appraisals, and carries out special studies as required on technological and economic developments affecting the supply, distribution and utilization of all fuels. The Supervisor of the section is presently on loan to the Advisory Committee on Energy and also acts in a liaison capacity with the Task Force Hydro project . The Energy Returns Officer and his staff carry out continuous surveillance of accounting records of gas companies under the jurisdiction of the Board. During the year this group was involved in providing financial information to the Board in connection with a major rate hearing and in the preparation of special accounting Orders related to gas supply matters. Both matters are discussed elsewhere in this Report. Proceedings before the Board are open to the public and, subject to certain limited exemptions, a public hearing is held before any Order is .cade. The legislation provides that Board decisions may be ippealed to the Court of Appeal - 4 - and reviewed by the Lieutenant-Governor in Council. In accordance with its usual practice, the Board held hearings at locations convenient for the Applicants and other interested parties. Thirty-one hearings were held outside Toronto, in Mount Forest, London, Sarnia, Windsor, Chatham, Harrow, Woodstock and Guelph. There were no amendments made to The Ontario Energy Board Act during 1971, nor were any new Regulations made under the Act. HEARING STATISTICS The Ontario Energy Board Act Gas Rates and other charges for gas 30 Miscellaneous Orders 8 Leaves to construct transmission pipe lines . . 14 Land expropriations for pipe lines 9 Authorization of gas storage operations .... 1 Drilling of wells in gas storage areas (referred by Minister) 1 The Municipal Franchises Act Approval of gas franchise agreements (Section 9) 9 Certificates of public convenience and necessity (Section 8) _J£ 7k - 5 - RATES Following the conclusion of a lengthy hearing into an application of Northern and Central Gas Corporation Limited for an increase in its gas rates, the Board issued its Decision on October 29th. The Board concluded that the rate increases proposed by the Applicant would produce an excessive rate of return on the test year rate base. The Board ruled that a return on rate base of &.6% was reasonable and permitted an increase in revenue of $156,000 in the test year. Accordingly, the Board authorized the Applicant to submit rate schedules designed to increase revenue by not more than that amount and on filing of such schedules the hearing resumed. The Board rendered its supplementary Reasons for Decision on December 17th in which it approved the revised rates effective January 1, 1972. The Board rejected a proposal of the Applicant for inclusion of a purchased gas adjustment clause in its rate schedules. The Board did however state that the proceedings would be kept open with a view to enabling the Applicant to pass on certain increased gas costs expected to occur in 1972. In addition to the major rates case mentioned above, the Board dealt with a number of rates applications of lesser importance. Many of these were of a limited nature, e.g. the introduction of large volume industrial rates to new areas. Others were for rate approval on an interim basis, pending final determination by the Bo trd. - 6 - ACCOUNTING ORDERS During the year, the Board made three accounting Orders on requests by the three major utilities in the Province, The Consumers 1 Gas Company, Union Gas Company of Canada, Limited, and Northern and Central Gas Corporation Limited. Each of these companies obtains all or nearly all of its gas from Trans- Canada PipeLines Limited. This supplier has for some time past been before the National Energy Board seeking authority to in- crease its rates and it has asserted the need for increased revenues to enable it to finance a major construction program so that it can deliver adequate gas supplies in 1972 to meet in- creased market demands. Pending a final decision of the National Energy Board on the application to it, the Ontario utilities agreed to pay Trans Canada an additional 2.10 per Mcf for all gas delivered beginning January 1, 1972. At their request, account- ing Orders were issued by this Board permitting them to defer the supplemental cost of gas supply in their accounts pending the N.E.B. decision and future consideration by this Board. PIPE LINE CONSTRUCTION AND EXPROPRIATION OP EASEMENTS THEREFOR The Ontario Energy Board Act prohibits the construction of a gas or oil transmission pipe line without leave of the Board. If leave to construct a pipe line has been granted, the Board may also grant authority to expropriate land for the purpose of the pipe line. - 7 - The cases in 1971 involving pipe line construction varied in importance, but several were of* particular interest. The Consumers 1 Gas Company applied for leave to construct a 23-mile, 30" gas transmission pipe line from the TransCanada PipeLines Limited system in Markham Township to the R. L. Hearn generating station of Ontario Hydro on the lakefront in downtown Toronto. A large group of property owners along the proposed route of the pipe line were concerned about the safety of the pipe line and its proximity to their properties. Following a public hearing at which many of the homeowners were represented by Counsel, the Board granted approval for the project subject to a minor re- location in that portion of the route which utilized an existing Ontario Hydro right-of-way. Sun-Canadian Pipe Line Company obtained leave from the Board to construct 63 miles of a 12" liquid hydrocarbon trans- mission line. This pipe line will loop the company's existing 8" Sarnia to Toronto pipe line in two sections; Petrolia to London and Woodstock to Paris. Approval was given to the Union Gas Company of Canada, Limited for the first two stages of a project which will loop its Waterloo to Owen Sound transmission pipe line. The Board also approved the construction of several Union Gas pipe lines to be built in Windsor and in Essex and Kent Counties to augment present facilities and thus provide for increased demands for natural gas . - 8 - As in previous years a special pipe line inspector was appointed to act as liaison between the landowners and the pipe line companies during construction and clean-up periods and to ensure compliance with any terms and conditions of Board* s Orders related to the construction. GAS STORAGE MATTERS The Board is responsible in several respects for control of gas storage and, among other things, makes recommendations to the Minister with respect to applications for permission to drill wells in designated gas storage areas. During 1971 Tecumseh Gas Storage Limited, in accordance with the Board* s recommendation, was permitted to drill three wells in the Kimball- Co linville Pool, two in the Seckerton Pool and one in the Corunna Pool. This work completed the Company's drilling program in the Corunna and Seckerton Pools but additional wells are expected to be drilled in the Kimball- Colinville Pool during 1972. The joint application of Union Gas Company of Canada, Limited and Imperial Oil Limited for authority to inject, store and remove gas in and from the Bickford and Sombra designated gas storage pools, which had been under adjournment since 1969 at the request of the Applicants, was resumed in November of 1971. The working storage capacity of these two pools is approximately 15.9 Bcf. As a result of amendments, Union Gas became the sole Applicant with Imperial Oil as an interested party supporting the application. - 9 - TransCanada PipeLines Limited appeared as an Intervenor, stressing the need for additional gas storage capacity. The Consumers 1 Gas Company and Ram Petroleums Limited appeared as Intervenors object- ing to the granting of the application. They outlined alternatives to the proposed storage, submitting that there are other existing and potential storage areas available at less cost. The hearing concluded in late December and the Board reserved its decision to consider the evidence and argument. The decision, issued early in 1972, authorized gas storage by the Applicant in the Bickford and Sombra Pools, subject to certain conditions. JOINING OF INTERESTS FOR THE PRODUCTION QP GAS OR OIL The Board is empowered by section 24(c) of The Ontario Energy Board Act to: "require and regulate the joining of the various interests within a field or pool for the purpose of drilling or operating wells, the designation of management and the apportioning of the costs and the benefits of such drilling or operation." In 1971 the Board dealt with four applications under this legislation. The first application concerned the Willey Oil Pool located in Elgin County. International Utilities Petroleum Corporation and other persons having working and royalty interests in the Pool wished to increase the oil production by a waterflood secondary recovery operation. They were unable to obtain the unanimous agreement of all interests and applied to the Board for a com- pulsory unitization order. A jublic hearing was held in London and resulted in a Board Order joining the interests in the Pool. -10- apportioning costs and benefits and designating International Petroleum as manager of the unit operations. Later in the year Imperial Oil Limited made two applications to have Bralorne Oil 6- Gas Limited designated as manager of the unit operations being carried on in the Clearville Oil Pool, located in Kent County, and in the West Becher Oil Pool in Lambton County. These operations are waterflood secondary re- covery projects for which Imperial Oil Limited had previously been designated manager. The applications were granted following public hearings. Union Gas Company of Canada, Limited made application for the joining of interests for the purpose of producing gas from an area comprising 750 acres in Lambton County known as the Bentpath Pool. All of the oil and gas leases in this Pool are under the control of Union Gas, having been obtained either by it or by Imperial Oil Limited. Interventions were filed by a number of landowners, seeking better terms for themselves, and fairly lengthy public hearings were held. The hearings concluded late in December and the Board reserved its decision. APPROVALS AND CERTIFICATES The Board approved the terms and conditions of nine gas franchise agreements, each being between a gas distributor and a municipality not formerly served with gas. The Board issued certificates of public convenience and necessity for three of these municipalities (Deserontc, Erin Village and Erin Township), where distribution facilities > ere to be constructed immediately. -11- CONCLUSION The Board is following with interest the proceedings before the National Energy Board and other developments that may affect the cost of gas to Ontario distributors, and will do its best to prepare for whatever applications it may receive from the Ontario distributors.